Trust Services in UAE

Trust is one of the oldest mechanisms for wealthy families to safeguard their possessions. It initially arose in the United Kingdom, but it quickly spread over the globe. The UAE’s Sharia Law does not contain any provision for the formation of Trust. However, each emirate has its own set of rules. In 2005, Dubai recognized the importance of Trust and enacted the Trust Law. This legislation was revised twice in 2007 and the second in 2010. A trust may be established within onshore following Federal Law No. (19) of 2020 on Trust and in a free zone such as Dubai International Financial Centre (DIFC), one of the emirate’s most respected free zones. The DIFC Trust Law lays forth particular standards that must be met. If any of these conditions are not met, there can be no confidence. Our Dubai company formation agents can provide further information on the Trust Law.

Definition of Trust

According to Article 1 of the UAE Trust Law, Trust is defined as:

1. The Transfer of a property under a Trust Instrument,
2. For the benefit of the Beneficiary or to accomplish a charity or special purpose, and
3. Following the UAE Trust Law

Parties to a Trust in UAE

There are three primary partners in a trust:

1. The Settlor:

Every Trust will have a settlor. The Settlor is the person who gives the trustees the assets. The person who creates the Trust and transfers assets to it is the Settlor. A settlor is also known as a grantor, creator, donor, or trustor. The Settlor maintains the right to alter, change, or cancel the Trust in a living trust.

2. Trustee:

Anyone may be nominated as a Trustee as long as they are mentally competent. The Settlor must specify the Trustee’s name in the trust deed when appointing them. When a Settlor creates a trust, he transfers assets to trustees. Legal ownership flows from the Settlor to the Trustees when the Trust is founded. Trustees are legal entities having independent legal personalities, much like a business or an individual. The rights and discretions mentioned in the Trust Instrument and under this Decree-Law are transferred to a trustee.
It is always advisable to appoint a Professional Trustee and a Professional Legal Person such as HHS Lawyers and Legal Consultants to carry out the Beneficiary’s interest or the Trust Purpose. Professional trustees are paid fairly for their services as trustees, either by law or a provision in the trust deed. However, they are not authorized to profit from the Trust.

Advantages of establishing a Trust in the UAE

Among the primary benefits of trusts are the following:

The ability to specify how and when your assets are transferred after your death;
Reduce or eliminate estate and gift taxes;
It helps to avoid the Probate procedure. Probate is the legal process by which a judge distributes your assets to the parties listed in your Will. Probate and the accompanying expenses are generally avoided by establishing trusts.

Different kinds of Trust

Trusts are classified into four types:

Private trusts are established for private persons and their estates.
Corporate Trust: Pensions and employee benefit trusts are examples of corporate trusts.
Trusts for charitable purposes: Established only for the benefit of charity groups
Trusts with a specified purpose: trusts with a defined purpose.

How to create a trust in Dubai?

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Requirements for creation of a trust and valid Trust Deed

Article 6 and 7 of the UAE Trust Law include specific elements to be completed for a trust to be lawful and enforceable:

1. Registration of Trust in Register:

All Trust Instruments must be registered in a maintained register to record and document Trust Instruments. As the case may be, Settlor, or the Trustee, may request for the Trust Instrument to be published in the Register, together with any necessary information. The authority in charge of the Register must issue an official certificate. The Certificate certifies that Trust Instrument has been deposited into the Register and a list of the trust properties.

2. Settlor’s Legal Capacity

To establish a Trust, the Settlor must be of legal age. According to Article 85 of the Federal Law No. 5 on the Law of Civil Transactions in the UAE, anybody who:

i. achieves the legal age of majority,
ii. has complete mental capacity, and
iii. is not barred from exercising his rights,
iv. he is presumed to have full ability to do so.
v. A person is considered full age when he achieves the age of twenty-one lunar years.
Suppose a Settlor is a legal entity, such as a corporation. In that case, the competent authorities must determine how to dispose of its assets according to Federal Law No. 2 of 2015 on Commercial Companies.

3. The Settlor must be the Property’s owner.

Another need for creating a Trust is that the Settlor owns the Property and has the power to dispose of it. When the Trust is founded, the Settlor must lawfully hold the Property, and the Property must be defined. The Settlor must also be able to transfer property to the Trust.

4. Trust Property Identification

The Property held under the terms of the Trust and the beneficiaries’ rights to that property must be described precisely. What Property will be subject to the trusts, and what amount or share of the Property each Beneficiary will be entitled to, must be decided.

5. Determination of the Trust’s Purpose

The Settlor must specify the aim of the Trust Deed. It may be set up for charitable or particular reasons, as defined by UAE Trust Law.

6. Determination of the Trust’s Purpose

The Settlor must identify the persons or groups of individuals who the trustees will regard to be beneficiaries of the Trust. If no clear beneficiaries can be identified, the trust property is believed to be held for the Settlor or his estate, and the trust deed is deemed illegal. A trust must have one or more beneficiaries to be legal. The recipient (or beneficiaries) must be recognizable and specified.

7. Using clear words and a clear goal to create Trust

The trust deed’s wording must clearly state that the Settlor wants the Property to be held in Trust and that Trust is intended. There must be a clear goal to build Trust via specific words or actions. When the Property transferred into the Trust is legitimately held by the Settlor, his purpose must be present. In some instances, no paper is sufficient to create Trust. In such circumstances, the Court must analyze the parties’ intent to create a trust based on their words or acts.

Why should you establish a trust in Dubai?

A trust in Dubai enables foreigners who live in the Emirates to understand their money, which will be handed on later in line with the parameters stated. Investors might establish trusts in Dubai as part of their investment strategy, particularly if they want to develop businesses in the UAE. If you are a foreign investor looking to establish a trust in Dubai, we encourage you to contact our law office in Dubai for thorough assistance and legal help on this subject.

Trust services offered by HHS Lawyers and Legal Consultants

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Trust Services in UAE

Definition of Trust

Parties to a Trust in UAE

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Advantages of establishing a Trust in the UAE

Different kinds of Trust

How to create a trust in Dubai?

Requirements for creation of a trust and valid Trust Deed

Why should you establish a trust in Dubai?

Trust services offered by HHS Lawyers and Legal Consultants

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